Jan 19.2015:Germans repatriate 120 tonnes this year and 85 tonnes in December/Russians increase gold reserves/Coup in Yemen/Denmark increases negative interest rates


Gold close from Europe:  $1277.00

Silver close:$16.70


Due to the huge news with respect to the German repatriation, the Danish central bank move plus other important developments, I am providing a small commentary for you tonight, without any comex and currency data


And now for your most important physical stories on gold and silver today:



We just got word that Germany repatriated 120 tonnes of gold:  35 tonnes from Paris France and 85 tonnes from NY.  We already knew that 47 tonnes was repatriated from FRBNY (to Germany and Holland) during the month of November of which 3.5 tonnes belonged to the Netherlands.  Thus 43.5 tonnes of gold was repatriated to Frankfurt for the entire 2014 year up to the November figure. With the BuBa announcement of 85 tonnes arriving in December, we now know that Germany repatriated 41.5 tonnes of gold in December. We will get verification of that on the release of the FRBNY figures next week.  However was is true is the speed of repatriation is accelerating


(courtesy Koos Jansen)


Posted on 19 Jan 2015 by

Germany Repatriated 120 Tonnes Of Gold In 2014

The central bank of Germany, BuBa, has just released the numbers of their gold repatriation activities in 2014. More than expected the Germans shipped home 85 tonnes of gold from the Federal Reserve Bank of New York (FRBNY),previously BuBa hinted at withdrawing 30 to 50 tonnes from New York in 2014, from France 35 tonnes were returned. Below we can see an overview from BuBa of all repatriation activities since 2013:

Screen Shot 2015-01-19 at 11.15.20 AM
Source: Bundesbank
Screen Shot 2015-01-19 at 11.15.29 AM
Source: Bundesbank

There has been a lot of fuzz about the German gold repatriation schedule, which in 2013 was set to return 674 tonnes before 2020, when only 37 tonnes reached German soil in the first year. Many eyebrows were lifted in the gold space; is there any gold left in New York? Why is it taking seven years to repatriate a few hundred tonnes? Especially the fact only 5 tonnes were returned from the FRBNY in 2013 was suspicious. In my opinion it’s very strange only 5 tonnes returned in the first year, but as far as my intelligence goes this was wasn’t unilaterally obstructed by the Fed.

More speculation went round when in November The Netherlands announced they had secretly repatriated 122.5 tonnes from the New York. The FRBNY publishes on a monthly basis how much gold they hold in total as foreign deposits. When we learned The Netherlands had repatriated 122.5 tonnes somewhere in between January and November 2014, some suspected most of what was drained from the FRBNY, as published by year to date FRBNY data, was brought to The Netherlands and Germany wouldn’t meet its schedule for 2014. But because the FRBNY data lags a few months analyst could only speculate as they didn’t have the total numbers of 2014.

At this moment we have FRBNY data up to November.

FRBNY foreign gold deposits November 2014

FRBNY Nov 2014

January till November 2014 the FRBNY was drained for 166 tonnes, if we subtract 123 tonnes The Netherlands got out that leaves 43 tonnes for Germany. The fact Germany claims to have repatriated 85 tonnes from New York in 2014 means they must have pulled 42 tonnes from the Manhattan vaults in December. By the end of this month (January 2015) the FRBNY will release the foreign deposit data of December and we’ll see if the numbers match. If not, there obviously is a “problem”. Otherwise, everything is going to plan and we are only left to think about what reasons BuBa has to take seven years to repatriate 674 tonnes. Perhaps this time is needed for out great leaders to shape a new international monetary system. Who knows? It can’t be because of logistical reasons as hundreds of tonnes of gold are shipped around the world every year – for example, Switzerland exported 2,777 tonnes of gold in 2013.

Koos Jansen




Then we got more clarification from zero hedge. Note that half way down the Bundesbank’s comments on the repatriation they state that 50 tonnes of gold had to be refined and recast.  He states that the weights as per gold match the original figures.  As we have highlighted to you above, the FRBNY has repatriated 85 tonnes of gold with the other 35 tonnes of gold coming from Paris France.  The reason that the French gold was left alone and not recast or refined was due to the fact that it was London good delivery bars.  Now what about the 85 tonnes from which 50 tonnes have been recast?  It seems that 35 tonnes are London good delivery bars. The world gold council lists Ukraine with official reserves of 36.1 tonnes of gold.  You will also recall that there was a switch of some bars with painted lead in Odessa in late November 2014.

I think we can safely say that we have  definitive proof (to be verified by bar numbers) that the Ukrainian gold landed in Germany together with some gold painted lead bars.


Now for the other 50 tonnes:

It would now seem that the FRBNY has no official title to the gold in its possession having probably sold or through hypothecation or rehypothecation lost it.Thus the reason for the USA refining  gold into new blocks.  The original bricks are gone!!

All gold at the FRBNY is earmarked gold.  It cannot be touched.  It belongs to a foreign nation who pays no storage fees, or insurance etc for the privilege.  I guess we now know why this is so:  so the crooks can steal the gold.


(courtesy zero hedge)

Germany’s Bundesbank Resumes Gold Repatriation; Transfers 120 Tonnes Of Physical Gold From Paris And NY Fed


Three weeks ago, when looking at the latest NY Fed data of foreign gold held at the largest central bank gold vault in the world, we showed that in the month of November not only was a near record amount of gold withdrawn from the NY Fed, which at 42 tons was the single biggest monthly outflow at the NY Fed in over a decade…

… but that though the end of November, all of the Netherlands’ 122 tons of gold withdrawals had been fully accounted for. This brought up an interesting question:

“… net of the Netherlands withdrawals,there is some 44 tons of extra gold that has been also quietly redeemed (by another entity). The question is who: is it now the turn of Austria to reveal in a few weeks that it too, secretly, withdrew some 40+ tons of gold from “safe keeping” in the US? Or was it Belgium? Or did the Dutch simply decide to haul back some more. Or did Germany finally get over its “logistical complications” which prevented it from transporting more than just a laughable 5 tons in 2013? And most importantly, did Germany finally grow a pair and decide not to let “diplomatic difficulties” stand between it and its gold?

We now know the answer, and it was, indeed, the latterwith confirmation coming from the Bundesbank itself. As the German Central Bank announced earlier today, after withdrawing an embarrassing 5 tonnes of gold from New York in 2013, its rate of repatriation soared, and in what appears to have been just the past two months, has transferred a whopping 85 tonnes of gold from 80 feet below street level at Liberty 33 back to Frankfurt!

From Buba:

The Bundesbank successfully continued and further stepped up its transfers of gold last year. In 2014, 120 tonnes of gold were transferred to Frankfurt am Main from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York. “Implementation of our new gold storage plan is proceeding smoothly. Operations are running very much according to schedule,” said Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank.


The Bundesbank took advantage of the transfer from New York to have roughly 50 tonnes of gold melted down and recast according to the London Good Delivery standard, today’s internationally recognised standard. “We also called on the expertise of the Bank for International Settlements for the spot checks that had to be carried out. As expected, there were no irregularities,” said Mr Thiele.


According to its new gold storage plan, unveiled in January 2013, the Bundesbank will be storing half of Germany’s gold reserves in its own vaults from 2020 onwards. This necessitates a phased transfer to Frankfurt am Main of 300 tonnes of gold from New York and all 374 tonnes of gold from Paris.


Since the transfers began in 2013, the Bank has relocated a total of 157 tonnes of gold to Frankfurt am Main – 67 tonnes from Paris and 90 tonnes from New York. This is equivalent to roughly 23% of the total quantity to be transferred. The following table gives an overview of the gold that has been transferred to date.



As at 31 December 2014, the Bundesbank’s gold reserves were stored at the following locations.


And the punchline:

The Bundesbank assures the identity and authenticity of German gold reserves throughout the transfer process – from when they are removed from warehouses abroad until they are stored in Frankfurt am Main. As soon as the gold was removed from the warehouse locations abroad, Bundesbank employees cross-checked the lists of bars belonging to the Bundesbank against the information on the bars removed. Finally, once they arrived in Frankfurt am Main, all the transferred gold bars were thoroughly and exhaustively inspected and verified by the Bundesbank. When all the inspections had been concluded, no irregularities came to light with regard to the authenticity, fineness and weight of the bars.

A curious amount of precautions and safeguards when transporting the “safe” and “untainted” gold held at the NY Fed to Frankfurt. Almost as if the Bundesbank, gasp,did not trust the quality and content of the NY Fed-held gold, nor its well-meaning intentions.

Ironically, it was exactly one year ago that we wrote “Germany Has Recovered A Paltry 5 Tons Of Gold From The NY Fed After One Year” in which we wrote:

The official explanation was as follows: “The Bundesbank explained [the low amount of US gold] by saying that the transports from Paris are simpler and therefore were able to start quickly.” Additionally, the Bundesbank had the “support” of the BIS “which has organized more gold shifts already for other central banks and has appropriate experience – only after months of preparation and safety could transports start with truck and plane.” That would be the same BIS that in 2011 lent out a record 632 tons of gold…


Welt goes on to “debunk” various “conspiracy websites” that the reason why the gold is being melted is not to cover up some shortage (and to scrap serial numbers), but that the gold is exactly the same gold as before. Finally, to silences all skeptics, the Bundesbank says that “there is no reason for complaint – the weight and purity of the gold bars were consistent with the books match.” In conclusion, Welt reports that in 2014 “larger transport volumes” can be expected from New York: between 30 and 50 tons.

Welt was off by just 50% with the full 2014 repatriated amount hitting 85 tons in what appears to have been a year-end scramble following the Netherlands repatriation shocker. And, as it turns out, all it took for the Bundesbank to send its repatriation amounts surging is for the Dutch to show it how it is done: i.e., by plane because crossing the Atlantic with a Brinks’ truck full of gold certainly presents some “logisitcal challenges.”

Sarcasm aside, it is quite clear that “logistical difficulties” is merely a politically correct strawman. Recall the real reason for the paltry repatriation by Buba in 2013, as explained by Deutsche Bank two months ago:

… the gold community paid great attention to the decision of the German Bundesbank to “bring German gold home”. At the beginning of 2013, the Bundesbank announced it would repatriate 300 tonnes of gold stored in the US by 2020. It is well behind schedule, citing logistical difficulties.Yet diplomatic difficulties are more likely to be the chief cause of the delay, especially seeing as the Bundesbank has proven its capacity to organise large-scale gold transports. In the early 2000s, the Bundesbank incrementally repatriated 930 tonnes of German gold held by the Bank of England.

Which leads us to the only relevant question: now that the “diplomatic difficulties” have been overcome and the Bundesbank is back on track to repatriating precisely the right amount of gold from the NY Fed to indicate that it has far less faith in the US central bank than it did when it was barely conducting any transfers in 2013, just how worse as the diplomatic difficulties now? We expect to get at least a partial answer on Thursday when Mario Draghi finally announces his long-overdue €500 billion QE program, with Bundesbank’s Jens Weidmann, sitting quietly in a corner, and ignored by the ex-Goldman head of the ECB, contemplated just how much more, if not all, gold (there is still some 517 tonnes of gold left to be repatriated to Germany from NY and Paris) he should withdraw now in preparation for the “next steps”?

One thing is certain: Germany sends its kindest gratitude to Ukraine, whose gold, now long gone, is most likely to be found in a far safer, and remelted, state somewhere in the bowels under Wilhelm-Epstein-Straße, number 14 in Frankfurt am Main.



The Russians sell more of their dollar reserves and purchase gold with it:


(courtesy GATA/Bloomberg)

“De-Dollarization” Deepens: Russia Buys Most Gold In Six Months, Continues Selling US Treasuries


The rumors of Russia selling its gold reserves, it is now clear, were greatly exaggerated as not only did Putin not sell, Russian gold reserves rose by their largest amount in six months in December to just over $46 billion (near the highest since April 2013). It appears all the “Russia is selling” chatter did was lower prices enabling them to gather non-fiat physical assets at a lower cost. On the other hand, there is another trend that continues for the Russians – that of reducing their exposure to US Treasury debt. For the 20th month in a row, Russia’s holdings of US Treasury debt fell year-over-year – selling into the strength.  

Buying low…

Russia gold reserves jump the most in six months in December, near the highest since April 2013…


and selling high…

Russian holdings of US Treasuries are now at the 2nd lowest since 2008…


It would appear the greatest rotations that no one is talking about are the fiat to non-fiat and the paper to physical shifts occurring in China and Russia.

Charts: Bloomberg

Some have commented on the “unprecedented” capital flight from Russia, but as Dr. Constantin Gurdgiev explains – Western ‘analysts’ appear to have forgotten a few things

Central Bank of Russia released full-year 2014 capital outflows figures, prompting cheerful chatter from the US officials and academics gleefully loading the demise of the Russian economy.
The figures are ugly: official net outflows of capital stood at USD151.5 billion – roughly 2.5 times the rate of outflows in 2013 – USD61 billion. Q1 outflows were USD48.2 billion, Q2 outflows declined to USD22.4 billion, Q3 2014 outflows netted USD 7.7 billion and Q4 2014 outflows rose to USD72.9 billion. Thus, Q4 2014 outflows – on the face of it – were larger than full-year 2013 outflows.
There are, however, few caveats to these figures that Western analysts of the Russian economy tend to ignore. These are:
  • USD 19.8 billion of outflows in Q4 2014 were down to new liquidity supply measures by the CB of Russia which extended new currency credit lines to Russian banks. In other words, these are loans. One can assume the banks will default on these, or one can assume that they will repay these loans. In the former case, outflows will not be reversible, in the latter case they will be.
  • In Q1-Q3 2014 net outflows of capital that were accounted for by the banks repayment of foreign funding lines (remember the sanctions on banks came in Q2-Q3 2014) amounted to USD16.1 billion.You can call this outflow of funds or you can call it paying down debt. The former sounds ominous, the latter sounds less so – repaying debts improves balance sheets. But, hey, it would’t be so apocalyptic, thus. We do not have aggregated data on this for Q4 2014 yet, but on monthly basis, same outflows for the banking sector amounted to at least USD11.8 billion. So that’s USD 27.9 billion in forced banks deleveraging in 2014. Again, may be that is bad, or may be it is good. Or may be it is simply more nuanced than screaming headline numbers suggest.
  • Deleveraging – debt repayments – in non-banking sector was even bigger. In Q4 2014 alone planned debt redemptions amounted to USD 34.8 billion. Beyond that, we have no idea is there were forced (or unplanned) redemptions.
So in Q3-Q4 2014 alone, banks redemptions were scheduled to run at USD45.321 billion and corporate sector redemptions were scheduled at USD72.684 billion. In simple terms, then, USD 118 billion or 78 percent of the catastrophic capital flight out of Russia in 2014 was down to debt redemptions in banking and corporate sectors. Not ‘investors fleeing’ or depositors ‘taking a run’, but partially forced debt repayments.
Let’s put this into a slightly different perspective. Whatever your view of the European and US policies during the Global Financial Crisis and the subsequent Great Recession might be, one corner stone of all such policies was banks’ deleveraging – aka ‘pay down of debt’. Russia did not adopt such a policy on its own, but was forced to do so by the sanctions that shut off Russian banks and companies (including those not directly listed in the sanctions) from the Western credit markets. But if you think the above process is a catastrophe for the Russian economy induced by Kremlin, you really should be asking yourself a question or two about the US and European deleveraging policies at home.
And after you do, give another thought to the remaining USD 33 billion of outflows. These include dollarisation of Russian households’ accounts (conversion of rubles into dollars and other currencies), the forex effects of holding currencies other than US dollars, the valuations changes on gold reserves etc.
As some might say, look at Greece… Yes, things are ugly in Russia. Yes, deleveraging is forced, and painful. Yes, capital outflows are massive. But, a bit of silver lining there: most of the capital flight that Western analysts decry goes to improve Russian balance-sheets and reduce Russian external debt. That can’t be too bad, right? Because if it was so bad, then… Greece, Cyprus, Spain, Italy, Ireland, Portugal, France, and so on… spring to mind with their ‘deleveraging’ drives…





Rutherford talks about the turmoil caused by the Swiss unpegging:

(courtesy Sprott Asset Management/GATA)

Swiss turmoil vindicates hard assets, Sprott says


10a ET Saturday, January 17, 2015

Dear Friend of GATA and Gold:

Markets overcame a central bank last week when the Swiss National Bank repudiated its pegging the Swiss franc to the euro, Sprott Asset Management CEO Eric Sprott tells Sprott Money News interviewer Geoff Rutherford in their weekly market review. Sprott adds that there were phenomenal losses in derivatives last week and as market volatility increases, people may realize that hard assets are the best preservers of wealth. The interview is nine minutes long and can be heard at the Sprott Money Internet site here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.





Same subject as above:

(courtesy  Aurelia End/Agence France Press/Yahoo News/GATA)



Swiss lose battle in currency war, which could spread


By Aurelia End
Agence France-Presse
via Yahoo News
Sunday, January 18, 2015


PARIS — Historically neutral Switzerland’s foray into the global currency war ended in defeat this past week after its central bank left markets shell-shocked by abandoning the franc’s exchange rate floor, analysts said.

But with major shifts in monetary policy under way, the currency war is hardly over and the front lines will move to other countries.

“The Swiss central bank was the first to throw itself into the currency war, (and) it is the first to capitulate,” said Christopher Dembik, an economist at Saxo Bank.


The capitulation amounted to abandoning the Swiss franc’s exchange rate floor of 1.20 francs to the euro, which the Swiss National Bank had imposed more than three years ago to stop the franc from appreciating too much against the European single currency.
But on Thursday the SNB raised the white flag and surrendered, letting the franc float.

The shock announcement was felt across the globe as the franc immediately strengthened by 30 percent against the euro. It has since settled at around parity with the euro, which is a 15 percent gain in value since the floor was removed.

The move caused plenty of collateral damage: stocks in Swiss companies heavily dependent on exports were devastated. It engulfed eastern European neighbours whose mortgage debt is denominated in the franc, and wiped out at least two international foreign exchange brokers.

Dembik said Switzerland beat a retreat on the currency battlefield before the European Central Bank at its meeting Thursday comes out “with a major weapon” — namely a massive sovereign bond-buying programme that would flood the market with euros and raise demand for the Swiss franc, a top safe haven currency.

“The central banks talk among themselves and the Swiss know that in the case of ‘quantitative easing’ (QE) by the ECB the floor is no longer tenable,” said Philippe Waechter, economist at Natixis AM.

For Daragh Maher, a strategist at HSBC, “by removing the floor, the SNB is no longer compelled to intervene, a tactic which had become politically contentious.”

The tactic was controversial because it was costly. The SNB had to buy massive amounts of foreign currencies to contain its own money, an astronomical cost equivalent to 85 percent of the country’s gross domestic product, according to Simon Ward, economist at Henderson Global Investors.

But the SNB did not totally desert the field: it dropped its key interest rate to below zero at minus 0.75 percent in the hope that it would discourage investing in the Swiss franc.

Switzerland may be a sign of currency battles to come.

“Given the general gloom over growth, the exchange rate is one of the last levers” that can be used to bolster the economic situation a country faces, said Dembik.

“The Asian countries will be on the frontline, for example, South Korea, Taiwan,” he said. These countries suffer from a strong fall in the yen, which in turn benefits their Japanese competitors.

“The big emerging economies, like Brazil, will certainly also need to play with the exchange rate,” he added.

The intensity of the global currency battles will depend a lot on the US Federal Reserve. The Fed has signalled a cycle of rising rates, while the ECB has been pursuing a policy exactly opposite to expansion, which has strengthened the dollar against the euro.

Until now Washington has been hands off the greenback but the Fed could, according to some experts, put the brakes on the US currency by delaying for several months its first rate rise, which the markets expect in early summer.

“The monstrous adjustment of the euro”, which just on Friday fell under $1.15 for the first time since November 2003, “forces one and the other to revise their positions,” said Waechter.

Some economists however don’t see the world’s currencies in conflict.

Agnes Benassy-Quere, a professor at the Paris School of Economics, said “it seems an exaggeration to talk about a currency war when one sees in the world floating exchange rates and the free movement of capital.”

She thinks the adjustments in the exchange rates of currencies often reflect a “good functioning” of the system in which Switzerland was an anomaly with its rate floor.

The Swiss “had taken a course that’s used infrequently” and “weren’t playing the game of financial globalisation,” she said.






(courtesy Mike Kosares/GATA)


Mike Kosares: Swiss treachery shows gold can be pretty good insurance


5:15p ET Sunday, January6 18, 2015

Dear Friend of GATA and Gold:

Losses incurred by big investment houses and their clients for betting on the integrity of the Swiss Natinal Bank may be big enough to cause a financial crisis, Mike Kosares of USAGold in Denver writes today.

Kosares adds that gold is pretty good portfolio insurance against various disasters, including central bank treachery. “As happened last Thursday,” he writes, “you retire in the evening and all appears to be normal, or at least as normal as can be expected in these precarious times. You wake up in the morning only to find that the interconnected global financial village has just gone over a cliff. One owns gold not because he or she thinks it might turn a profit. One owns it to protect his or her portfolio against the very same kind of unforeseen event that occurred last Thursday.”

Kosares’ commentary is headlined “Big Hedge Fund Goes Bust, $830 Million Loss on Swiss Franc Trade” and it’s posted at USAGold’s Internet site here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




Bill Holter now gives an extremely important commentary, focusing on the Swiss unpegging.  Embedded in the commentary is a very important commentary from Koos Jansen’s website written by “Mystery Writer”

I urge you to pay attention to everything:




(courtesy Bill Holter/Miles Franklin)






The Reset Has Already Begun!




For several years there has been talk of a financial and economic “re set” coming, this is no longer speculation as the reset has already begun!  The Swiss have suppressed the price of their currency, the franc, since late 2011.  They pegged the franc versus the euro with a “floor” versus the euro at 1.20.  After confirming this floor publicly on Monday, they abandoned it Thursday only to see the euro depreciate through the par level.  What you saw on Thursday and Friday was the work of Mother Nature as the Swiss decided they would be better served by no longer battling her.

  The ramifications of this move by the Swiss are almost infinite when you consider the chain reactions they have now started.  Several large FOREX firms including the largest retail firm in the U.S., FXCM, were rendered bankrupt overnight.  Even Goldman Sachs and Citi admitted to being offside and sustained large losses.  As of right now, we have no idea who “won” and who “lost”, nor do we know “how much?”.  We heard almost nothing from Swiss or European banks on Friday, “who what and how much?” will begin to surface this coming week.  As I have written for years now, if the loser goes bankrupt, the winner does not get paid…thus turning the winner into a loser.  This is a very big problem the markets ignored on Friday but will not be able to ignore as the dead bodies begin to surface.
  Think about this point very seriously, many investors (and firms) went to bed Wednesday evening with no stress at all on their portfolios (or their business), in just five minutes Thursday morning they were insolvent.  Just FIVE MINUTES!  We are only talking about “investments” here, how many other real businesses in the import and export area are now broke?  Broke because they hold euros but need francs or they export from Switzerland or import to Europe and now their business model makes no sense?  How is this even possible in just five minutes time?
  Another aspect to what and how the Swiss moved on Thursday is that of “central banks” themselves.  Did the Swiss not know they were going to float the franc on Monday when they confirmed the peg publicly?  Did they or did they not inform the IMF prior their actions?  What about the BIS which is headquartered within their borders in Basel, surely they tipped them off?  Christine LaGarde claimed in an interview with CNBC that she had no prior notice, really?  If this is true then it shows the Swiss central bank has moved in an “every man for himself” type of action.  It also shows the “united front” of central banks is not so “united” anymore!  If Ms. LaGarde is not telling the truth and in fact the IMF did have prior knowledge, what would this mean?  It would mean the central banks are finally losing control of the rig.  It would also mean the central banks have distorted currencies, interest rates etc. so badly that once Mother Nature takes over, we can expect repeat performances all over the world and amongst all assets and currencies.  How can I say this?  I would simply ask if it is “normal” for two trading currencies to revalue 30% in five minutes or if it is not normal, what was the cause?  We of course know, the cause was the actions of the ECB and SNB over these last three+ years.
  We have already speculated the Swiss made this move for one of two reasons.  First, they may have decided the amount of euros necessary to purchase (and thus the amount of francs created) will go exponential this coming week when the ECB goes full on QE (printing).  We also know that euros already make up more than half of their balance sheet.  The other possibility is they know the Greek election is coming up, (the Greek banks are already experiencing bank runs) and they see the very real possibility of the Eurozone fracturing or even dissolving.  Another possibility is maybe they just decided “their first loss is their best loss”?  Maybe they have watched as the core of Europe has asked for their gold back and understand that “trust” amongst central bankers is waning?  Maybe they simply decided to front run the obvious and necessary re set and do it on their own terms?  It is very hard to say what exactly the motivation was, the important thing to understand is their action has started a re set in motion which will not be stopped!  In plain English, the Swiss just yelled FIRE …while standing in the exit!
  I have several other questions but first I want to point out the obvious.  Oil was cut in more than half in dollars over 6 months, could you say the price of oil was “re set”?  How about copper?  How about other foreign currencies?  Could the huge moves in so many assets qualify as being “re set”?  The collapse in oil and copper prices are black swans pointing to a rapidly slowing global economy.  The Swiss removing their currency peg is another black swan event and in reaction to the ECB moving toward hyperinflating their currency.
  My biggest question now is this, what will happen when China allows their currency to float?  The Swiss are one thing, China is whole different story!  Think of the ramifications when it comes to trade?  Another, maybe even more important question is what will happen when the Chinese “force” the price of gold and silver to trade freely?  Let me explain this further.  The Chinese know full well that gold IS money, otherwise they would not have spent the last several years buying almost every single ounce that came from the ground.  They know it is artificially priced by New York and London.  They can “float” gold in several manners.  First, they can simply bust the COMEX and LBMA by bidding for and purchasing both their entire inventories within a 24 hour window.  Another possibility would be to simply put out a “global bid” and state some price (much higher than current) they are willing to buy any and all gold, presto, COMEX and LBMA would be busted without them doing it directly!
  I recently wrote of a “Global Margin Call” where because oil and other assets, currencies, etc. have moved so rapidly, many derivatives traders have surely been thrown “offside”.  This move by the Swiss is nothing different except it was done “officially”.  Actually, the funny thing is they moved to suspend what they were “officially” (and artificially!) doing.  The move by the Swiss has only made the global margin call that much bigger!  The global re set which was already in the works is now publicly and officially happening before your very eyes.  You can close your eyes or not believe this fact, it will not make it go away, nor will it insulate you financially from what is coming.
  To finish, and I plan to follow up maybe even tomorrow, the most important re set will be that of gold and silver prices.  I say “most important” because these are the only “tools” available to you as an individual to protect your wealth.  If the Swiss franc and the euro can change in value by 30% within five minutes, what do you think the revaluation of gold and silver will be when the 100 ounces of “paper metal” come looking for the real thing?  At what price will the market clear?  Add a zero?  Two zero’s?  Please understand this, when the margin call is issued worldwide, there is only one money where the call will work in reverse, precious metals.  The “call” will be for real, yet non existent metal.  Gold had already sniffed this margin call and re set out a couple of months ago.  No matter how much paper was thrown at it, it simply stopped going down.  Even while the dollar strengthened synthetically, gold went higher versus the dollar.  Gold has clearly been THE best money, what do you think will happen to real metal when it turns out that 99% of the supposed global supply is proven as counterfeit?
  We will soon witness the greatest margin call in all of history.  We will also witness the greatest transfer of wealth and re set in all of history!  My only question is whether what so far has been “rolling re sets” becomes an official market/bank/finance closure and announced …or, do the markets continue to trade and force re sets in market after market.
  As an additional note, we have one last question to ponder which may or may not be connected.  Koos Jansen put forth a “mystery guest’s” theory that the Swiss went short gold in Sept. 2011 which marked the top in gold.  He asks in the following link, “did Switzerland just cover their short”?
  I believe there may be some credence to this theory but would go one step further.  Zerohedge asks the question and speculates Japan may be the next “Switzerland” and pull the plug on Abenomics.  Personally I see it a little differently, more importantly, what if the Chinese were to react to the coming QE4 by doing two things?  What if China just walked away and sold their dollar holdings …and at the same time revoked their current peg of the yuan to the dollar?  Will China some day ratio back their yuan with gold?  I think this is likely.  Would the dollar collapse 30%  like the euro just did versus the franc or will the re set be much larger?  Of course the next question would be “how high would gold be marked up”?  An unpegging of the yuan by China would be more important and (current) system ending than nearly anything else I can imagine.  For China to break their peg, the paper short positions in gold and silver would finally be exposed for what they are, counterfeits!  Regards,  Bill Holter
And now for your more important paper stories of today.
Late last night, Chinese stocks crash following a crackdown on margin accounts:
First story:


(courtesy zero hedge)


Chinese Stocks Crash Following Renewed Crackdown On Margin Accounts

Tyler Durden's picture

Who could have seen this coming?


Having tried and failed once to stem the speculative frenzy in Chinese stocks, regulators took more direct action tonight and suspended three of the biggest securities firms from adding margin-finance and securities lending accounts for three months following rule violations. As Bloomberg reports, Citic Securities, Haitong Securities, and Guotai Junan Securities shares plunged dragguing the entire Shanghai Composite down almost 7% and negative year-to-date.



As Bloomberg adds,

Regulators may have been concerned that stock gains, partly driven by margin financing, are too rapid, according to Hao Hong, a strategist at Bocom International Holdings Co. in Hong Kong. The move came after the Shanghai Composite Index surged 63 percent in six months and brokers including Citic and Haitong announced plans to raise more money to lend to clients.


“Brokerage shares are likely to get hit,” Hong said before the market opened today. “After all, margin financing is one of the reasons for people to be bullish on brokerage stocks, and these stocks have run particularly hard.”


Citic and Haitong, the nation’s biggest brokers by market value, announced plans for share sales that will help fund an expansion of businesses including margin financing. Those two and Guotai Junan were the three largest by assets in a 2013 ranking by the Securities Association of China.


“The regulators are doing this to cool down the stock market,” said Castor Pang, head of research at Core-Pacific Yamaichi in Hong Kong. “Stock market sentiment will definitely go down.”



*  *  *



Second story:


Zero hedge discusses the huge collapse in Chinese stocks Sunday night:


(courtesy zero hedge)



Market Wrap: Chinese Stocks Crash As Financials Suffer Record Drop; Commodities Resume Decline; US Closed

For all those who alleged the Chinese stock move in recent months, was nothing but another investing mania, i.e., bubble, benefiting a select few, because as weshowed in July, unlike the US where 70% of household wealth is in financial assets, in China it is the other way around, with three quarters of “net worth” parked in real estate which is merely the latest bubble to pop…

… congratulations, you were right.

This was once again confirmed last night when the Chinese stock market waterfalled into the biggest market crash in over 6 years, with the SHCOMP closing down nearly 8% and in the process triggering various circuit breakers, most notably the CSI 300 index which fell by the 10% daily limit and the Chinese financial index (-9.9%) posting its biggest 1-day drop on record after China cracked down on continuing margin-finance and securities lending violations. In other words, the entire run up was thanks to speculation-enabling margin trading, and massive investor leverage; leverage which may or may not disappear. If the SHCOMP crash accelerates in coming days, wtch as Citic, Haitong et al once again flout regulations with the secret blessing of the PBOC, because an uncontrollable market crash is no longer acceptable to anyone.

Details on the Chinese crash from Bloomberg:

  • Shanghai Composite Index falls 7.7%, most since June 2008, after three of biggest China brokerages were suspended from adding margin-finance and securities lending accounts for 3 mos. following rule violations.
  • Index erases gain of past 3 weeks; volume roughly matches 3-mo. daily avg
  • Property stock index leads rout with 9.1% decline, paring 12-mo. gain to 76%
  • CSI 300 falls 7.7% led by financials, energy; 48 stocks drop 9% or more incl. airlines, banks, securities cos.
  • “Regulators are concerned that shares have run too hard, too fast:” Bocom strategist Hao Hong
    Citic Securities, Haitong Securities — two of the 3 facing suspension — plunge by 10% limit in Shanghai
  • HSCEI falls 5%, most since 2011, led by Haitong Securities (-17%), Citic Securities (-16%)
  • China’s regulators don’t “want to crush the rally as such, but they just want to make sure the financial system is sound and not too much leverage has been abused:” Khiem Do, head of Asian multi-asset strategy at Baring Asset Management
  • Shenzhen Composite Index closes down 3.4%
  • Singapore-traded China stock futures fall as much as 14%
  • Stock connect investors turn sellers in China shares

A bigger picture view: Asian equity markets traded mixed with Chinese bourses underperforming amid a crackdown on margin trading, which has prompted a sharp sell-off across brokerages and financials. Consequently, the Hang Seng trades down 1% while the Shanghai Composite (-7.7%) marked its biggest drop since July 2009, with theChinese financial index (-9.9%) posting its biggest 1-day drop on record. Nikkei 225 (+0.8%) was unable to hold above 17,000 as a strong JPY prompted the index to come off best levels.

And while the move in China may be seen as a BTFD opportunity by some, the reality is that a weak China is here to stay for a long, long time, and in fact, the ongoing housing bubble pop is likely to get far worse before it gets better. To wit:


Curious where crude is going next? Hint: not up:


Sure enough, that latest surge higher in crude on Friday is once again starting to get undone.

As for the next shocking currency devaluation: could it be the Yuan?


That said, following last week’s Swiss stock market massacre as a result of a central bank shocker, and last night’s crack down by Chinese authorities, it almost appears as if the global powers are doing what they can to orchestrated a smooth, painless (as much as possible) bubble deflation. If so, what Draghi reveals in a few days may truly come as a surprise to all those- pretty much everyone – who anticipate a €500 billion QE announcement on Thursday.

Elsewhere, European equities (Eurostoxx50 +0.2%) trade higher with thin volumes and a light data slate ahead as US markets are closed for the Martin Luther King holiday.The premise of ECB has also supported equities after weekend reports that ECB’s Draghi met with German Finance Minister Schaeuble and German Chancellor Merkel to discuss the extent to which national banks will be liable for the sovereign bond purchase programme, meaning German’s liability will be smaller than any other countries losses. In other news, the SMI (+3.4%) outperforms European indices after recovering from last week’s sharp selloff following the SNB decision. Meanwhile, the energy sector continues to underperform with oil prices slightly lower in the session after comments from the Iraqi Oil Minster overnight.

In FX markets, EUR/USD briefly broke back above 1.1600 triggering stops at the handle with EUR strength observed across the board following subdued market conditions. Elsewhere, in Asia the JPY gained against all of its peers as the Shanghai Comp (-7.7%) marked its largest decline since July 2009 after it was reported that Chinese regulators would crackdown on margin trading which prompted sharp selloff among Chinese bourses.

Iraq’s Oil Minister said Iraq is to boost its crude exports to 3.3mln bpd in 2015 sending WTI and Brent Crude to break the USD 49 and USD 50 handle respectively. In precious metals, Gold (-0.37%) saw a mild loss overnight following last week’s near 5% rise, where the safe-haven soared amid the SNB-triggered FX volatility, with prices of the precious gold metal remaining near 4-month highs after the SPDR Gold Trust also increased holdings by the most since May 2010.

Copper prices have seen a slight pull-back from Friday’s highs amid profit taking ahead of this week’s key-risk events with Chinese GDP scheduled for tomorrow and the ECB meeting on Thursday, while iron futures were also weaker overnight with investor sentiment dampened after data over the weekend showed China’s property prices declined at a faster pace in




Early this morning, we get the architect of Abenomics saying there will be no additional QE coming from Japan.



(courtesy zero hedge)


Architect Of Abenomics Says No More BOJ Easing



And the hits just keep on coming.

A few days after the SNB shocked the world when it became the first central bank to pull out of its currency war with the ECB, leading to an epic defeat not only for the Swiss economy whose exports are now set to crash and various brokers and macro hedge funds who were short the Swissy (even as the SNB is nursing an epic balance sheet as as result of its failed 3+ year intervention), and following the latest Chinese snub of its overzealous stock gamblers, next up on the “shock and awe” bandwagon may be none other than the Bank of Japan (something we noted over the weekend in “Is The BoJ The Next SNB?”), where according to Reuters, any hopes for even more QE may be dashed after a ruling party lawmaker and one of the architects of Prime Minister Shinzo Abe’s “Abenomics” policies said that the Bank of Japan “does not need to ease monetary policy further this year unless the economy is hit by a severe external shock.”

As a reminder, it was just hours after the Fed’s QE ended on October 31, when the BOJ shocked markets with expanding its own QE even further, sending the USDJPY soaring above 120. The problem is that with the Nikkei tracking the USDJPY tick for tick, implying all risk gains come at the expense of currency losses, last Firday the Nikkei had fully roundtripped to the level seen just after the announcement, suggesting any further gains would require even more easing. Easing, which will not come unless Japan’s economy, already in freefall, literally implodes.

In the absence of sudden external shocks, the BOJ does not need to expand its stimulus again this year because the effect of its monetary easing in October last year should start boosting the economy by around this summer, he said.


“What more can the BOJ do? I think the central bank can hold off on action and take a wait-and-see stance for the time being,” Yamamoto told Reuters in an interview.


The BOJ’s stimulus program, dubbed “quantitative and qualitative easing” (QQE), was among the three arrows of “Abenomics,” a mix of stimulus policies and a growth strategy to unshackle the economy from 15 years of deflation.

The remarks by Yamamoto, a close aide to Abe, suggest the government does not feel an imminent need to pressure the central bank into offering another fresh stimulus.

“Japan will probably see inflation hit 2 percent in fiscal year 2016,” he said, adding that lower fuel costs will allow households to spend more on other items, keeping the economy in “very good shape.”

Yamamoto’s opinion is key, and a good predictor of future Japanese policy: a vocal advocate of aggressive monetary stimulus, Yamamoto had told Reuters in a previous interview on Oct. 8 that the BOJ needed to deploy additional stimulus to ease the pain from a sales tax hike in April last year. He also said Abe should delay a second tax hike, initially scheduled for October 2015. Both proposals became true. The BOJ expanded QQE three weeks later and Abe postponed the second tax hike by 18 months.

Which puts even more pressure on Draghi to act on Thursday, and act big because if the BOJ is out of the picture with additional stimulus (keeping its baseline to just around , the SNB is done, and the Fed is expected, even if by an increasingly smaller group of people, to hike rates, it leaves just Mario Draghi’s printers to provide the bulk of the $250 billion needed every quarter to keep markets from crashing. Recall, per Citi calculations, “The Magic Number Is Revealed: It Costs Central Banks $200 Billion Per Quarter To Avoid A Market Crash.” Because when one eliminates all the lies about keep inflation in check, avoiding a market crash is what it is all really about.





War Drums beating again!!



(courtesy zero hedge)




Ukraine’s Poroshenko Rejects Putin’s “Peace Plan”; Massive Shelling Ensues


Further to the dramatic footage yesterday, Ukrainian troops have launched a massive assault on militia-held areas, according to RT. This comes on the heels of Ukraine’s President Petro Poroshenko rejecting a peace plan proposed to him last week by his Russian counterpart Vladimir Putin. As Reuters reports, Putin’s spokesman Dmitry Peskov said on Sunday evening, according to Russian media, that the plan, contained in a letter sent by Putin on Thursday evening,proposed a ceasefire by both government forces and separatist militiamen in southeastern Ukraine, as well as the withdrawal of heavy artillery by both sides. Given the images below, it will be hard to see how Ukraine (and The West) will spin this…


As Reuters reports,

Ukraine’s President Petro Poroshenko rejected a peace plan proposed to him last week by his Russian counterpart Vladimir Putin, Putin’s spokesman Dmitry Peskov said on Sunday evening, according to Russian media.


Peskov said the plan, contained in a letter sent by Putin on Thursday evening, proposed a ceasefire by both government forces and separatist militiamen in southeastern Ukraine, as well as the withdrawal of heavy artillery by both sides.


“In recent days, Russia has consistently undertaken efforts as an intermediary in regulating the conflict,” Peskov said in comments quoted by the ITAR TASS news agency.


“In particular, on Thursday night a written address was sent by the president of Russia to the president of Ukraine, in which a concrete plan was proposed to both sides in the conflict to withdraw heavy artillery.”


A copy of the letter was published by the Russian television channel NTV. In it, Putin proposed “urgent measures for the cessation of mutual shelling, and also the rapid withdrawal by the sides in the conflict of means of destruction with a caliber higher than 100 mm”.

*  *  *

While, as The Burning Platform exclaims, Ukraine appears to be in full-scale war but the US mainstream media remains silent…

Ukrainian troops have launched a massive assault on militia-held areas. The Putilovsky Bridge, which is located near the Donetsk airport has been destroyed in the shelling along with countless buildings.

Anti-Kiev forces alleged to be the Novorossia Armed Forces (NAF) firing on Kiev positions just outside Donetsk with field artillery. The footage was reportedly filmed overnight on Saturday.

The suspected sound of a jet engine was heard moments before a rocket attack targeted the area surrounding Donetsk International Airport on Friday.

Read more here…





Amazing!! Iceland is now withdrawing its application to join the EU.

I guess they figured it out correctly!!




(courtesy zero hedge)


First It Refused To Bail Out Its Insolvent Banks; Now Iceland Set To Officially Withdraw European Union Application

Iceland may be a small country, but when it comes to dealing with big problems it is truly the modern equivalent of David in the battle against the status quo Goliath. First, it was Iceland, and only Iceland, refusing to bail out its banks, when every other western nation was being held hostage by those who stood to lose the most from a financial collapse, and even going so far as throwing some of its banking executives in prison. And now, as MBL reports, Iceland’s con­ser­v­a­tive In­de­pen­dence Party will sup­port a res­o­lu­tion in par­lia­ment to for­mally with­draw Ice­land’s ap­pli­ca­tion to join the Eu­ro­pean Union.

As MBL further reports, yhis was con­firmed to­day by Bjarni Benedik­ts­son, Min­is­ter of Fi­nance and the par­ty’s chair­man, in an in­ter­view with the state broad­caster RÚV.

The EU ac­ces­sion talks were put on hold af­ter the gen­eral elec­tions in April 2013. The elec­tions re­sulted in the In­de­pen­dence Party and the cen­trist Progress Party form­ing a coali­tion gov­ern­ment backed by 38 MPs out of 63 in to­tal. Prime Min­is­ter Sig­mundur Davíð Gunnlaugs­son said ear­lier this month that he ex­pected a res­o­lu­tion with­draw­ing the EU ap­pli­ca­tion to be put to the par­lia­ment soon and For­eign Min­is­ter Gun­nar Bragi Sveins­son, who as Gunnlaugs­son be­longs to the Progress Party, has said it would be sense­less not to with­draw the ap­pli­ca­tion. If any­thing Sveins­son has said there are more ar­gu­ments for do­ing so now than a year ago.


The gov­ern­ment put such a res­o­lu­tion to the par­lia­ment last year but the mat­ter was not con­cluded be­fore sum­mer re­cess. Mainly be­cause of a fil­i­busted which was staged by the op­po­si­tion call­ing for a ref­er­en­dum on the is­sue. As a con­se­quence the gov­ern­ment de­cided to post­pone the mat­ter as it con­sid­ered more press­ing to get other is­sues ac­cepted. Pri­mar­ily laws paving the way for a gov­ern­ment pro­gram to re­duce house­hold debts.


“This is a res­o­lu­tion which we sup­ported last year,” Benedik­ts­son said adding that noth­ing had changed since then. Asked if that meant the con­ser­v­a­tives would sup­port a res­o­lu­tion to with­draw the EU ap­pli­ca­tion he replied: “Yes, we would do that just like we did last time.”

So yes, dear Greece: as you prepare for elections whih may result in the first official departure of a European country from the Eurozone, not only has Iceland shown that one can voluntarily not seek to be part of the “greater European good”, but in fact voluntarily seek to not be part of said good.

And the cherry on top: as recently as 2013 the country was growing at over 5%: a rate unmatched anywhere in Europe, and on par with the latest annualized US GDP. The one difference, however, is that Iceland does not mandate the “GDP-boosting” and middle-class impoverishingObamcare.





One of many hedge funds that are blowing up:


(courtesy zero hedge)





Everest Macro Hedge Fund Blows Up After Nearly $1 BIllion In Swiss Franc Losses


Yesterday, when we got the first news of huge P&L losses at various publicly-traded banks not to mention the collapse of several retail brokers culminating with the bailout of FXCM by Jefferies, we reminded that seconds after the SNB shocker, we tweeted what was quite obvious to anyone who realized that speculators were most short the CHF since the summer of 2013:

We also added that “We have yet to find out just which hedge funds were blown up yesterday”, for the simple reason that unlike public banks who have an obligation to reveal news, especially bad, to their shareholders, hedge funds PMs hope to avoid the LP firing squad until the last second. Alas, there is only so long that the day of reckoning can be delayed.

One such fund is the Everest Capital Global macro fund, which went from just shy of a billion to zero in milliseconds as a result of a near wipe out due to a massive CHF-short position. Bloomberg reports:

Marko Dimitrijevic, the hedge fund manager who survived at least five emerging market debt crises, is closing his largest hedge fundafter losing virtually all its money this week when the Swiss National Bank unexpectedly let the franc trade freely against the euro, according to a person familiar with the firm.


Everest Capital’s Global Fund had about $830 million in assets as of the end of December, according to a client report. The Miami-based firm, which specializes in emerging markets, still manages seven funds with about $2.2 billion in assets. The global fund, the firm’s oldest, was betting the Swiss franc would decline, said the person, who asked not to be named because the information is private.


Everest grew to $2.7 billion by the start of 1998 after navigating crises in Mexico and Southeast Asia. Russia’s default and currency devaluation proved trickier and assets fell by half amid losses. He revived the firm and a decade later Everest managed $3 billion. Then the global financial crisis hit, and assets shrunk by $1 billion.


Last year, the main fund rose 14.1 percent, driven by Chinese equities and bets against currencies, including a wager that the Swiss franc would fall after citizens rejected a referendum that would require the central bank to hold at least 20 percent of its assets in gold, the investor report said.

In other words, Dimitrijevic survived the vagaries of extremely volatile markets for over 15 years, and even flourished, yet all it took to destroy him was one decision by a conference room full of central-planners who were confident they knew better than the market for the second time in 3.5 years. Ironic.

One thing is certain: it is not just the former Yugoslav who feels as if he has fallen off the top of Everest this weekend, many other funds are too. Here is who else has been named so far according to the WSJ:

Other hedge funds that have suffered amid the Swiss turmoil, according to people familiar with the situation, are Discovery Capital Management LLC, a South Norwalk, Conn. firm that manages $14.7 billion, and Comac Capital LLP, which oversees $1.2 billion in London.

Expect to learn of more casualties from the historic move in the coming days, and certainly once other banks follow in the footsteps of the Swiss central bank, and like the Pied Piper, lead all those “sophisticated investors” who were merely frontrunning and trading alongside central banks on massive leverage pretending they were generating alpha, right off the edge of the cliff.





I was waiting for Bruce Krasting’s commentary on the Swiss unpegging.  Bruce puts a good argument out there that the Swiss wanted to punish investors and that is why they pulled the plug on the peg on Thursday instead of waiting for Sunday.


To me, I kind of like the story put forth by “Mystery Writer” (from Koos Jansen’s website, In Gold We Trust) who hypothesized that Switzerland (sovereign) had written massive calls against their gold.  Afraid that their gold would be collared by Friday, they unpegged their currency to the Euro, forcing the currency higher and the Swiss price of gold below 1100.00 Swiss francs per oz.  The author believes that much of the naked calls were underwritten by the Swiss at that level. Prior to the peg, the price of gold per oz in Swiss Francs was around 1200 and no doubt the owner of those calls would probably take possession of gold instead of taking fiat profits. (sovereign China maybe?)


(To view the entire article see Bill Holter’s commentary which contains the story)



SNB – Post-Mortem

Bruce Krasting's picture

The Swiss National Bank move to eliminate the 1.2 EURCHF Peg has proven to be a big market/media event. Follows a few random thoughts on how this story played out. Caveat – Some of this is wonkish, some guesses on my part.


The Weekly FX Flows

The FX market has two different types of risk profiles depending on what day it is. The two risk periods are:

Monday through Friday

Friday night through Sunday night

There are risks that the FX market participants face every second of the week. But the risks of the weekend roll are much higher than the Monday through Friday trading period

The developments during any given week may cause wild gyrations in FX pricing, but there is also a very active FX market to lay off, or take on risk. The FX market runs 24/7 from Monday morning in Asia until the close in NY on Friday. From Friday night to the next opening in Asia there is no market to lay off risk.

The fact that there are two different risk periods creates two classes of participants in the FX market. Short-term players who are trying to make a buck, but have no interest in taking positions over the weekend. And those who are taking a long-term view of the world, and are happy to take the risks associated with liquidity over the weekend. For every player who takes a long view there are 20 who only dance from Monday through Friday. The bulk of the actors are squared up for the weekend.

There is a very logical reason for this. Over the past twenty years the vast majority of “surprise” critical steps taken by government authorities have been taken on Sunday evenings. (Devaluations/revaluations, Fannie and Freddie going bust, TARP etc., Plaza Accord, Louver Accord) If you’re in the FX Biz you pay very close attention to what surprises may have been released when the markets have gone dark. And depending on your risk profile you want to be square for the weekend.

The SNB broke the “rules”. It dropped its bomb on a Thursday. It did it at a time that insured that the NY market was still asleep.

The SNB could have held off for a few days and made their big announcement on Sunday. The amount of gross positions outstanding on Sunday would have been a fraction of the positions that were outstanding on Thursday morning. Obviously, the timing by SNB was very deliberate. They acted in what I consider to be a hostile manner – the SNB was a predator to the market participants. Not very sporting at all.

If the SNB had acted in a manner consistent with how Central Banks/Government make announcements of key changes to policy, the losses incurred by the market would have been far less than what they were. The retail accounts that have been blown away this week would not have suffered anywhere near the losses they did. I would add to this that if the announcement had come over the weekend there would not have been a 20% move in the CHF. The adjustment would have been closer to 10%.

My conclusion is that the SNB deliberately screwed the market, and in the process shot itself in the foot for 30-50 billion dollars. What were they thinking?


Did the 2014 Profits Play a Role in this?

Every January the SNB produces its annual profit and loss results. The surprise in 2014 was the size of the gains the SNB reported (CHF38B) . The headline from this year’s profit report:

Screen Shot 2015-01-17 at 8.05.15 AM

38B Francs is a huge amount of money. This treasure chest is equal to about half of the losses the SNB incurred when it floated the franc. My question is did the folks at the SNB already know that they were going to pull the plug on the peg on January 9 when they released the profit report?

The huge profit report plays into the story, but I’m not sure if the way it was introduced allows for a definitive conclusion that the decision to float had been made six days before the actual event. My read of these tea leaves is that the SNB was, at a minimum, considering the float on January 9, but had not yet made a final decision on when to act. The “profits” gave the SNB the ammo to take the huge loss. My question – Were the 2014 “profits” pumped up so that it would be “easier” for the SNB to act? I think there is a real possibility that those big gains were largely fluff.


On the SNB communication of January 6th

A very curious element in this is that three days before the float an SNB spokesperson, Jean-Pierre Danthine, had this to say:

“We took stock of the situation less than a month ago, we looked again at all the parameters and we are convinced that the minimum exchange rate must remain the cornerstone of our monetary policy,”

What to make of this? Was Jean-Pierre lying through his teeth when he said these words? Had the decision to float already been made?

I’m 100% convinced that the decision to float was made prior to the time that J.P. spoke. In other words J.P. lied; he was part of a deliberate effort to set the market up to be short the CHF and to cause the maximum amount of pain to the market participants.

I doubt we will ever know the facts on this. However if JP was tied down and water boarded he might fess up to being the guy who deliberately set up the market. I’m as certain as I can be that good old J.P. would not have said these words without the blessings of the head of the SNB, Thomas Jordan. So it is quite possible that this critical lie was set up by the guy who is running the show.

If this is correct, it is a heinous act. I would think that there would be lawsuits if it could be proven that the SNB deliberately set up the market – billions were lost as result of the J.P. statement. (where is that water-board when you need it?)


Jordan Acts Old School Style

Jordan must have read from Paul Volker’s playbook. Volker was famous for his “surprises”. During those years I was on an FX trading desk. We were always afraid of the “Volker Factor”. Markets were under siege by the Fed. As a result positioning was kept light, and market liquidity suffered. The “fear factor” worked to Volker’s advantage, but even he would would admit that he was responsible for a great sucking noise in the markets. Volker succeeded, but the costs were very high.

Central Bank communication policy has morphed over the past 20 years. The changes were led by Greenspan who established the concept of ‘guidance’. The Fed became more open as a result. By communicating its intentions the Fed was able to steer capital markets in a way that suited it. The strategy of communication was designed to minimize the market shocks of unanticipated policy changes. For the most part, the policy of providing forward guidance has worked. Ben Bernanke took another leg up on the idea of communication as a means of guiding markets. Most other central banks have followed this policy.

But the SNB went entirely in the other direction. On Tuesday it said, “That will not happen”, three days later it happened. Thomas Jordan and his merry men at the SNB turned the clocks back 40 years.


There was No Crisis on Thursday

When the SNB established the Peg in 2011 there was a true market crisis going on. In a short period of time the EURCHF fell from 1.5 to parity. The SNB introduced the Peg in the same manner that they have taken it off. It came as a surprise to the market, it caused an immediate 20% jump in the EURCHF. Pretty much the exact opposite of what happened on Thursday. One could argue that if the SNB went “Shock and Awe” when the peg was established, it is equally fair that they took it off with the same Shock and Awe.

BUT – There was no market panic last Thursday. There was no crisis that forced the SNB to act on that day. The EURCHF was trading above the peg, it had been for days prior. The SNB had some bids in the market to ensure that there was no move to the 1.2000 level. The intervention required to maintain the Peg in the days just prior to the float was very small – under 10b CHF.

My point is that there was no compelling reason to act on a Thursday. Therefore the only conclusion I can draw is that the SNB acted in a malicious way. It took actions with the express intent of hurting the markets. It achieved its objectives. In the process the SNB incurred losses that are 50% higher then they might have otherwise taken.



What are the Other CBs Thinking?

As of last Tursday every Central Bank on the globe hates the SNB. Not only did the SNB destroy its own credibility, it undermined the credibility of every other CB. How many headlines like this have we seen the past few day? (hundreds).

Screen Shot 2015-01-18 at 10.03.06 AM


I’m convinced that the SNB move has put the ECB (Mario Draghi in particular) in a very difficult position. I expect that we will see markets converging on the ECB in the not too distant future. The empty promises of Uncle Mario are now just that – empty promises. Draghi’s job has just become incredibly more difficult – if not impossible.

The Japanese CB is now quaking. They have just observed first hand what happens when CBs take a U-turn. The BoJ has made more promises than any other CB. If the markets come to doubt the resolve and promises of the BoJ then you can kiss off any chance that the BoJ will succeed. A loss of confidence means that Japan will soon slip into another lost decade.

Any CB who is now managing a fixed currency is at risk. Hong Kong, China and Korea come to mind. If (when) any of these CBs come under attack they will face the same fate as the Swiss. The reality is that the global markets are much larger and more powerful than the CBs. What happened in Switzerland will be repeated elsewhere. It’s likely that these attacks will happen fairly soon.


What About the Players?

I do feel a bit sorry for those who lost big on the CHF move. I think they were set up, and lied to by the SNB. If the SNB had acted on a Sunday we would not be reading about all of the retail losses. The same is true for the big banks that got whacked (JPM, Citi, Deutsche, Barclays, and the many more will soon be fessing.

But – The losers were idiots! What were those thousands of retail investors thinking? In any market a player must think about risk and reward. The “reward” of being long the EURCHF on Thursday was maybe 25BP. This was obvious as the EURCHF had traded the last three days a few ticks away from the intervention zone. There were caution flags flying. Anyone who thought there was some free money on the table made a huge mistake. The downside risks of the short CHF was at least 100Xs what might have been realized if the SNB had not acted. YOU NEVER DO THIS! Never take a 100 to one shot. To bet $100 to make $1 is just stupid.

The retail brokers providing FX executions for retail have been buried with losses. I couldn’t be happier with this result. These clowns were providing 50X leverage to unsophisticated investors who did not understand the risks? They deserve to be wiped out.

There might be a few of these brokers left standing in a week – but I promise you the the days 2% margins on retail FX are over. Want to play in the FX sandbox? Be prepared to put 20% down. There are no profits left with that leverage, so the retail FX biz will disappear for a few years. (It will come back – greed trumps logic every time.)


Screen Shot 2015-01-18 at 10.10.42 AM






Not to be undone, the Danes goes more negative on NIRP as they slash the rates to -20 basis points. It will be very shortly we will see that their peg of 7.46 danish kroners per dollar will be obliterated. This too will not end well for the Danes:


(courtesy zero hedge)


Denmark Goes NIRP-er; Slashes Rates To -20bps Amid Currency Peg Fears


It appears the actions of the Swiss National Bank have prompted questions for all central banks as cash squirts away from the looming Euro crash (if France’s Hollande is to be believed) to any and every other currency. As theDanish Krone rallied to its strongest in 10 years against the EUR in the last few days, worries over the currency breaking its peg have apparently prompted the Danish Central Bank into action:


The immediate reaction was DKK weakness, but that has been completely unwound and follows worrying reassurances this week from Oestergaard that“Denmark’s Krone peg to the Euro is secure.”

As Bloomberg reports,

Denmark cut its deposit rate to defend the nation’s currency peg after the Swiss National Bank unexpectedly abandoned the franc’s cap to the euro last week.


The central bank in Copenhagen lowered its deposit rate to minus 0.2 percent from minus 0.05 percent, according to a statement today. The lending rate was cut to 0.05 percent from 0.2 percent.


The move comes amid speculation that Denmark could be forced to follow Switzerland, which had spent the last three years struggling to buy enough euros to support its exchange-rate regime. Denmark has maintained its currency peg for three decades. Its foreign reserves rose to 446.8 billion kroner ($69.9 billion) last month, compared with a high of 514.4 billion kroner in 2012.

EURDKK at near-10 year highs…


Well that didn’t last long…


And one final reminder: Danish households debt 321% of disposable income – OECD

*  *  *

And you know they are in trouble when the denials start… 


Remember what the SNB said about “surprises”




the world is getting scarier by the minute:


(courtesy zero hedge)




Argentine Prosecutor Found Dead Hours Before Testimony Against President Fernandez


The Argentine prosecutor who accused President Cristina Fernandez of orchestrating a cover-up in the investigation of Iran over the 1994 bombing of a Jewish community center has, according to AP, been found dead in his apartment, authorities said on Monday.As The Times of Israel reports, Alberto Nisman, 51, was discovered, by his mother, in a pool of blood in the bathroom on Sunday night with a gunshot wound to the head, hours before he was set to testify before lawmakers on his accusations of the cover-up. Coincidence we are sure, but police are investigating and Argentinian media reported that they had initially ruled the death a likely suicide but we note that The Clarin daily reported just a few days earlier that Nisman had told the newspaper, “I could end up dead because of this,” and in a separate TV interview, had also been considering increasing his security detail.


As AP reports,

The Argentine prosecutor who accused President Cristina Fernandez of orchestrating a cover-up in the investigation of Iran over the 1994 bombing of a Jewish community center has been found dead in his apartment, authorities said on Monday.


Alberto Nisman, who had been delving into the blast at the AMIA Jewish community center in Buenos Aires that killed 85 people, said last Wednesday Fernandez had opened a secret back channel to a group of Iranians suspected of planting the bomb.


He had said the scheme intended to clear the suspects so Argentina could start swapping grains for much-needed oil from Iran, which denies any connection with the bombing.


“Alberto Nisman was found dead on Sunday night in his flat on the 13th floor of the tower Le Parc, in the Buenos Aires district of Puerto Madero,” the Argentine Security Ministry said in a statement.


The ministry said Nisman’s security guards had alerted his mother on Sunday afternoon that he was not answering his front door or phone, and the Sunday papers were still on his doorstep.


Nisman’s mother found the door to his apartment locked from the inside and got a locksmith to open it. She found her son’s body on the floor of the bathroom, and called the police.


“Next to Nisman’s body … a 22-calibre handgun was found, together with a bullet casing,” the ministry statement said.


Nisman, who local media said was 51, had been due to take part in a closed-door hearing in parliament on Monday to explain his accusations against Fernandez.

As The Times of Israel explains, Nisman had filed a 300-page complaint naming Fernández, Timerman and others of seeking to “erase” Iran’s role in the bombing at the AMIA community center offices in which 85 people were killed. He had said he wanted to question the president and other officials whom he claimed were involved in the cover-up.

Nisman claimed that the president had decided to “not incriminate” former senior Iranian officials for their roles in planning the bombing, and instead has sought a rapprochement with Tehran, “establishing trade relations to mitigate Argentina’s severe energy crisis,” the Buenos Aires Herald reported.


When her agreement with Iran was challenged in the Argentinean courts, “and here is the criminal (aspect), the president ordered to divert the investigation, abandoning years of a legitimate demand of justice, and sought to free the Iranians imputed (in the case) from all suspicions, contradicting their proven ties with the attack.


“The president and her foreign minister took the criminal decision to fabricate Iran’s innocence to sate Argentina’s commercial, political and geopolitical interests,” the newspaper quoted Nisman as alleging.


Last May, an Argentine court declared unconstitutional an agreement between the Argentinian government and Iran to jointly probe the 1994 bombing of the Buenos Aires Jewish center. The agreement had been approved in 2013 by Argentina’s congress, at the request of the executive branch. Nisman consistently argued that the agreement constituted “undue interference of the executive branch in the exclusive sphere of the judiciary.”



Prosecutor Nisman traced the authorization for the July 18, 1994, terrorist attack to a meeting of Iran’s National Security Council held a year before, and compiled sufficiently compelling evidence of Iran’s role in the crime as to have several leading Iranian figures, including Vahidi and former presidential candidate Mohsen Rezai, placed on an Interpol “red notice” list. The final decision to attack the AMIA center was allegedly made by Supreme Leader Ayatollah Ali Khamenei and then-president Rafsanjani.


The specific motivation for the 1994 AMIA bombing, according to Nisman, was to punish Argentina for suspending its nuclear cooperation with Iran.

*  *  *
Finally, as AP adds, “He was alone in the apartment,” prosecutor Viviana Fein told reporters. “There are no witnesses.”

The Clarin daily reported just a few days earlier that Nisman had told the newspaper, “I could end up dead because of this.” Nisman, in a separate TV interview, had also been considering increasing his security detail.




And then this big event over in Yemen:


(courtesy zero hedge)



Yemeni Government Admits It Has Lost Control Of Nation Amid “Attempted Coup”



In what Yemen’s information minister described as an“attempted coup” Shia Houthi rebels (backed by Hizbollah and Iran) have surrounded the Yemeni Presidential Palace putting them, as The Telegraph reports, in direct confrontation with al-Qaeda and the Yemen government. Amid hopes of a compromise deal or cease-fire in the conflict that has been under way since September when the Houthis swept into Sana’a, the latest reports are the nation has gone from bad to worse…


Oil prices, interestingly, fell on the increasing tensions today – as we pre-suppose the market is pricing in a successful coup – and the ensuing pump-fest of supply (at any price – just give us revenues) will trump Yelemni tribes threats to cut off supply if the President is harmed.


Yemen official says Houthi rebels seize state news agency, TV station in ‘step toward coup’



Tribes in Marib say will cut supplies if Shiite rebels harmed President Abdurabuh Mansur Hadi, Al Jazeera reports without saying where it obtained the information.

Then this…


Which didn’t last long…


*  *  *

And then as CNN confirms,


As Bloomberg reports,

Yemen’s Houthi gunmen have laid siege to the residence of Prime Minister Khaled Bahah, Information Minister Nadia Sakkaf said, in the latest escalation between the Shiite group and authorities backed by Sunni Gulf Arab states.


The fighters have taken positions on buildings surrounding the palace in Sana’a, Sakkaf said on Twitter. Earlier, clashes broke out between Houthi fighters and presidential guards outside the compound of President Abdurabuh Mansur Hadi, prompting his intervention to broker a ceasefire. Eight people were killed in the fighting, Sakkaf said.



Tensions rose in Sana’a after Houthi fighters kidnapped Ahmed Bin Mubarak, the president’s chief of staff, on Jan. 17. Sakkaf said Hadi and the Shiite group were holding talks to agree on Bin Mubarak’s release. She didn’t elaborate.

*  *  *

In case you are confused, here is a quick glance at the Middle East relationships mosaic…

Click here for The Slate’s full interactive chart.


As The Telegraph explains… Who are the Houthi rebels?

While the West was transfixed by jihadi beheadings of hostages in Syria last autumn, another history-shaking episode in the breakdown of the Arab world was playing out 1,500 miles away.


Western leaders hardly seemed to notice. Buta once obscure Shia Muslim rebel movement known as the Houthis swept from the north into Yemen’s picture-postcard capital Sana’a, barging aside the US- and UK-backed army, and seized effective control.


Any thought that this was a random event in a country whose politics and feuds have always had the capacity to baffle its own people, let alone outsiders, was set aside with a single statement.


An Iranian politician close to that country’s Supreme Leader, Ayatollah Ali Khamenei, could not contain himself. Ali Reza Zakani, an MP, boasted that Sana’a was now the fourth Arab capital in Iranian hands – after Beirut (through Hizbollah), Damascus (through President Assad) and Baghdad (through Iraq’s democratically elected Shia-led government).


The extent to which Iran physically armed the Houthis is disputed, though a ship carrying weapons apparently from Iran was seized in Yemeni waters two years ago.


However, the Houthis have close ties to Hizbollah, and the fact remains that Shia militias or armies now control parts of both Saudi Arabia’s southern border, with Yemen, and northern border, with Iraq.


That is a stunning blow for Saudi Arabia,a hardline Sunni absolute monarchy which regards Iran, a Shia theocracy, as its mortal enemy for historic and political as well as religious reasons.


Read more here…

Who are the competing factions?

The government: still the government, in theory, through the ceasefire negotiated with the Houthis after they took Sana’a. Pro-western and with some electoral legitimacy after Mr Hadi won an election in 2012. Admittedly, he was unopposed – but he had the support of both the parliamentary majority and opposition.


Houthis: the Houthis’ adherents are Zaydi Muslims, followers of the Shia religious school historically seen as closest to Sunnis, which made it easier for a Zaydi caliph to rule much of present-day Yemen for many centuries until the 1962 revolution. However, the sect has come to be dominated by a clan that owes allegiance to a now dead rebel leader, Hussein Badreddin al-Houthi, who declared war on the government in 2004. The Houthis’ Shiism has led them to a pro-Iran, anti-Western position – its adherents carry flags saying, “Death to America, Death to Israel”.


al-Qaeda in the Arabian Peninsula: the settlement that brought Mr Hadi to power was also supposed to provide Yemen with a common front to take on al-Qaeda’s jihadist insurgency, backed by American air-power. Unfortunately, military success on the ground was countered by more attacks by AQAP on sectarian rivals like the Houthis, giving the latter a further pretext to oppose the government.


Al-Islah: a Sunni Islamist political movement which is Yemen’s version of the Muslim Brotherhood, it is the main constitutional opposition to the government. Its leaders have been targeted for reprisals by the Houthis, as the two represent the rival sects of political Islam.


Al-Hirak: just to complicate matters further, southern Yemen – centred on the part of the country once run by the British Empire and then by the Soviets – has a strong secessionist movement. Socially more liberal, even non-secessionist southern sheikhs occasionally surprise visitors by lapsing into fond memories of both British and Soviet colonialism.


Former President Ali Abdullah al-Saleh and General Ali Mohsen al-Ahmar: the eminences grises of Yemeni politics, these two distant cousins ran the country for decades, Mr Saleh as president and Gen Mohsen as effective security chief.


The two men fell out in 2011 as Mr Saleh refused to quit in the face of an “Arab Spring” uprising. In a strange twist, Mr Saleh, who fought the Houthis for years, is now said to be in such a sulk at having been forced from office that he is backing them with those parts of the army apparatus controlled by his many relatives, partly out of revenge against Gen Mohsen, who has retained power over a rival army faction.







And finally, trading in stocks and bonds from Europe today:


Bonds Pop, Stocks Drop As WTI Crude Slumps Back Under $48

US equity futures tossed and turned on another stormy (or exuberant) day of ECB chatter and SNB fallout…


China’s overnight dumpfest…


Took its toll on US sentiment – with The Dow down 40 points and S&P down 4.5 points


But QE was all that mattered for Europe…


Treasury Futures prices rose (implying yields dropped) – 5Y Yields outperformed dropping around 6bps and 30Y -4bps or so…


Gold jumped to around 1285 overenight before China started falling apart, slid to 1272 and bounced back to end modestly lower…


But probably most important, WTI crude fell back below $48 (and Brent below $49)


And copper turned back lower haveing retraced teh China crash from last week



Charts: Bloomberghttp://www.zerohedge.com/news/2015-01-19/bonds-pop-stocks-drop-wti-crude-slumps-back-under-48


*  *  *



Well that about does it for tonight.


I will provide my regular commentary with data from the comex together with currency data tomorrow


all the best




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